The main reason why 95% of Forex Traders lose. Is because of ‘Fear and Greed.’ They lack the ability to follow a very simple rule by over trading… which comes in two forms.
(A) They trade Forex by over leveraging their account.
(B) Traders trade in and out of too many trades in 1 trading session.
Let’s talk about ‘over leveraging’ first.
Over Leveraging Kills Forex Accounts FAST!
New and old traders alike seem to think they can use huge risk exposure to their account by increasing the lot size way beyond the maximum. Say they have a $500 account size and they are using $350 margin requirement of their open trades. This means if the lot size they have on will go more than
-$150.00 in the red. The Forex Broker will close out some or all of your open trades in a loss.
This is why it’s a good practice not to use more than 25% margin of your account balance. So you can withstand draw down. Meaning, your margin requirement will not be subject to loss. Because you will only be using 25% of $500 =$125.00.
You see, when you follow this rule of practice. You will erase your inner most fears of losing when in a trade.
Trading Forex Too Many Times In One Session!
Trading in and out of trades like a bunny rabbit will be a sure fire way to “Kill Your Trading Account” before your know it. Many traders guess which direction a Forex Pair is headed and once they see they are wrong they close out their trade with a small loss.
Never Get Mad When You Lose. And Never Get Excited When You Win!
But what’s worse about this. Is they get mad that they just lost and right away after they close the losing trade they jump into another trade. Accept this time they go long if they just lost in a short trade. And they do this for hours and hours – the next thing they know they done 15 to 30 trades. And they lost 25% to 50% or more of their account balance.
Even worse, each time they lose they increase their lot size. Which is what we call ‘Martingale.’ Which some gamblers use to play card games in Las Vegas. So you can see how quickly they will lose 50% of their account in an hour or two. In fact, some Kill Their Account in less than an hour because they do what we call “Revenge Trading.”
The More They Lose – The Madder They Get!
That’s right it’s like this inner anger increases by each trade they lose. Which causes themselves to trade bigger and bigger lot sizes… until their account blows up! Does some of these traders learn from this? Not very many because the statistics state that over 95% of all Forex traders lose!
But does this stop them from wiring in more funds a few days later? Not on your life! You see once they got the Forex Fever… they can’t seem to stop! And because they seem to convince themselves that trading is not a form of gambling. And they have a technical strategy is why some go on for years trading, when in reality, they should just give up because trading takes a lot of patience to become a successful Forex trader.
